Why You Might Want to be Colonel of your Own KFC Franchise

When you think of the KFC franchise brand, chances are you remember Kentucky Fried Chicken, Colonel Sanders, and the slogan, “It’s finger lickin’ good.”  The brand has come a long way since its Louisville, Kentucky origins. Today, KFC serves customers at home and abroad, of which 4,000 of its 23,000 locations are located in the United States. It is owned by parent company, Yum! Brands (YUM), which owns other restaurant giants such as Taco Bell and Pizza Hut.

Thanks to updates in store design, product innovation, food delivery partnership, and crowdsourced marketing campaigns, KFC has successfully rebounded from years of restaurant closings to solidify its place amongst the leaders in the fast-food chicken category. Still, it faces formidable competition from Popeye’s Louisiana Kitchen and even chains like Wendy’s and McDonald’s, which are serving their own versions of chicken-inspired cuisine. Here’s what you need to know if you are looking to open a KFC franchise.

History of KFC

KFC hatched from humble beginnings. The iconic “Colonel” Harland Sanders and founder of the company quickly became the “man” of the family at a young age after his father died. Because his mother spent her time working jobs outside of the home to support the family, Sanders was in charge of the cooking.

Before he became a restauranteur, Sanders spent time as a ferryboat operator, a fireman, and spent three months in Cuba serving in the Army, according to Food and Wine.

In 1930, Sanders opened his own gas station in Corbin, Kentucky, where he and his family were allowed to live in the back. On Sunday nights, Sanders cooked family dinners that included ham, steak and fried chicken. Instead of giving travelers restaurant recommendations, Sanders instead served them his family’s dinner—and increased his earnings. It was his well-known food, not his military experience, that gave Colonel Sanders his honorary title, thanks to Kentucky Governor Ruby Laffon, according to The Balance Small Business.

In 1939, Sanders pioneered the way fried chicken was prepared, introducing a pressure cooker into his process. This sped up cooking and allowed him to further expand his business.

In the early 1950s, the new Interstate 75 bypassed Sanders’ restaurant. While Sanders knew the new highway might ultimately hurt his business, he had faith in selling his chicken business. Sanders soon packed up his life and drove around the country selling his “11 secret herbs and spices” recipe to individual restaurants, in exchange for a nickel. He made his first sale in 1952, and by 1959, Sanders had made nearly 200 such deals throughout the United States and Canada.

In 1964, Sanders sold his “Kentucky Fried Chicken” company for $2 million. His influence did not fade. Until his death in 1980, Sanders worked as a spokesperson for the company he founded.

Over the years, KFC shed its original name and changed ownership a few times through sales and acquisitions, according to Biography. Here’s a brief history:

  • KFC went public in 1966 and was listed on the New York Stock Exchange in 1969.
  • More than 3,500 franchised and company-owned restaurants were in worldwide operation when Heublein Inc. acquired KFC Corporation in 1971 for $285 million.
  • KFC became a subsidiary of R.J. Reynolds Industries, Inc. (now RJR Nabisco, Inc.), when Heublein Inc. was acquired by Reynolds in 1982.
  • KFC was acquired in October 1986 from RJR Nabisco, Inc. by PepsiCo, Inc., for approximately $840 million.
  • In 1991, Kentucky Fried Chicken decided on a name change to a simpler KFC, but still retains the trademark of Kentucky Fried Chicken®.
  • PepsiCo decided to spin off its restaurant business into a new entity, Tricon Global Restaurants, in 1997. Tricon’s portfolio included Pizza Hut, KFC, Taco Bell, and KFC.
  • Fast forward to 2002: Tricon bought Long John Silver’s and A&W Restaurants’ parent company Yorkshire Global Restaurants. At that point, the company renamed itself to its current Yum! Brands.

Chicken Fight: Restaurants Compete for Market Share

America’s appetite for chicken bodes well for KFC and other eateries focusing on poultry as a major part of their business. According to the National Chicken Council, in 2018, Americans ate 93.8 pounds of chicken per person. In 2020, that number is forecasted to grow to 98.5 pounds. However, KFC in recent years has found itself facing stiff competition in this category.

According to Restaurant Business Online, from 2004 to 2015 KFC had shrunk by about 1,000 locations. According to the brand’s FDD:

 

  • In 2016, KFC shed 92 franchised units and 2 company-owned outlets.
  • In 2017, it lost a whopping 147 company outlets but gained 85 franchises.
  • In 2018, it stopped shedding company outlets (adding one) but closed another 31 franchise locations.

By 2019, KFC was ready to take some risks and grow again, making major investments in its franchisees, menu, delivery services, and marketing approach.

Multi-unit incentives, nontraditional locations
One of their approaches included offering incentives to franchisees to build new units. They also looked for new locations to build new restaurants, focusing more on nontraditional locations like airports and college campuses, and urban, inline locations, according to Restaurant Business Online.

A fresh new menu created with millennials in mind
Freshening up the menu – and taking risks – proved to be fruitful for the brand, which introduced chicken and waffles, Kentucky Fried Wings, the Cheetos Sandwich, Mac & Cheese Bowl, and a plant-based offering—KFC Beyond Chicken Nuggets and boneless wings, in its hopes to attract millennials, according to Business Insider.

Investment in Grubhub
Yum! Brands in 2018 had agreed to purchase $200 million of common stock in Grubhub, one of the country’s leading food delivery services. Its brands, including KFC, continued to take advantage of Grubhub’s online ordering and delivery capabilities to expand the restaurant’s reach and fulfill customer demand for food delivery.

Innovative marketing campaigns
Thanks to innovative marketing campaigns, KFC has invigorated its brand identity. Last year, it released exclusive products that celebrated the company’s heritage and its founder, Colonel Sanders. Some of these items included the KFC Limited clothing line, the Colonel Sanders Cat Climber, and the Colonel Sanders Floatie.

Innovation Lab
Also in 2019, KFC Innovations Lab was created to bring more new ideas to life, while also giving people the chance to be a part of deciding, through crowdfunding, which products are worth bringing to market.
Despite some setbacks earlier in the decade, some of these new tactics have kept KFC in the top tier of fast food chicken restaurants, both in the volume of systemwide sales and total number of units, according to a recent QSR Magazine ranking.

Is a KFC Worth the Investment?

The initial investment for of a single KFC franchise location varies depending on which type you choose to invest in. The initial investment of a new KFC location ranges from $1.42 million to $2.7 million, according to its FDD. (To begin operation of a reopened or remodeled KFC, you’ll spend a little less—between $1.1 million to $2.2 million.) While this investment falls in line with major fast-food eateries such as Wendy’s, Burger King and McDonald’s, its major competitor Chick-Fil-A, which operates under a different investment model, only requires an initial investment of $342,990 to $1,982,225.  Furthermore, competitor Popeyes requires an initial investment of between $383,500 and $1,254,800.

KFC franchising costs break down as follows:
•    Total Initial Investment: $1.44 to $2.77M
•    Franchise Fee: $45K
•    Royalty: 4% to 5% of monthly gross sales, or a minimum of $1,260 per month
•    Initial training: $4,500 to $5,000 per person (you are also responsible for your own expenses)
•    National co-op advertising fee: 4.5% of gross revenue

How KFC Compares to the Rest of The Flock (As of 2/2020)

Name Franchise Fee Total Initial Investment Royalty
Wendy’s  $40k  $2M to $3.7M  4% of gross sales
Burger King  $15k-$50k  $1.9M to $3.3M  4.5% of gross sales
KFC  $45k  $1.44K to $2.77K  4% to 5% of gross sales
McDonald’s  $45k  $1.26K to $2.34M  4% of gross sales
Chick-fil-A  $10k  $343K to $1.98M  Up to 3.25% in advertising fees as a % of gross monthly sales
Popeyes  $50k  $383,500 to $1.26K  5% of gross sales

 

What You Can Expect to Make

Investing in a KFC franchise may prove to be lucrative. According to the FDD, the average net sales of a single-brand, franchise-owned KFC in 2018 was $1,159M. This included 2,863 stores but did not include nontraditional, multi-brand, seasonal or any type of KFC location other than a single-brand location. All of the locations included in this number had been open a minimum of one year, according to the FDD.

Why Investing In A KFC Might be Right For You:

 

  • KFC’s parent company, Yum! Brands is expected to deliver a year-over-year increase in earnings on higher revenues when it reports results for the quarter ended December 2019. Revenues are expected to be $1.67 billion, up 7.1% from the year-ago quarter, according to Yahoo. The company continues to add to its portfolio. To compete with the burger giants, it recently bought the Habit Burger Grill (NASDAQ:HABT) chain for $14 per share, or approximately $375 million in January. The new CEO is adding depth to the portfolio and vision to its brands, which could bode well for franchisees.
  • You get to select the site for your store and develop your own site plan, which KFC LLC approves. According to the FDD, the typical length of time between signing a franchise agreement and option agreement and opening the outlet is between 6 and 9 months.
  • KFC is continuing to fly in line with the plant-based chicken trend. In August 2019, the chain sold out of its Beyond Fried Chicken in Atlanta. Now they’re bringing the product to nearly 100 stores in Charlotte, North Carolina, Nashville and other surrounding areas. Capitalizing on new taste trends could re-invigorate the brand’s popularity—and boost franchise sales.

Why You Might Want To Pass The Bucket:

  • KFC faces formidable competition, with many restaurants clucking for market share. There are now 37 chicken-centric restaurant chains and 73 chicken fast food franchises, according to Consumer Affairs. Popeye’s chicken sandwich was dubbed the biggest food news story of 2019 when it sold out of $3.99 fried chicken sandwiches in August 2019. McDonald’s and Taco Bell are already testing new fried chicken items, in efforts to replicate the type of success Popeye’s enjoyed. KFC will continue to see other restaurants take a bite out of the chicken market – which could eat at your revenues.
  • Especially compared to its rival Chick-Fil-A, KFC franchises are expensive investments that require a lot of up-front capital. Chick-Fil-A corporation will pay for land, construction, and equipment for a restaurant, then rent it to the franchisee for 15% of sales plus 50% of pretax profit remaining, according to its FDD. This is the major drawback of owning a Chick-fil-A — you don’t actually own your business. At the end of your franchise agreement with Chick-fil-A, you don’t own anything – which for many entrepreneurs is a deal-breaker. Also, Chick-Fil-A owners are only allowed to own one franchise, which differs from most franchise models where owners are responsible for several units. Still, a new report from restaurant-focused Kalinowski Equity Research found that McDonald’s franchisees largely believe Chick-fil-A is dominating the chicken sandwich wars, according to Business Insider.

Check out Some Finger Lickin’, Award-Winning KFC Alternatives

A KFC franchise is just one of many lucrative restaurant franchising opportunities available to candidates looking to enter the fast food sector. Before making your final decision, consider looking at some of these award-winning alternatives from our Top Food and Beverage Franchises list to see which franchise would be the best fit for you.

1. A&W

Recently named a Top Food Franchise by Franchise Business Review, A&W is back! You might associate A&W with its root beer floats, but this franchise is also responsible for inventing the bacon cheeseburger back in 1963. According to QSR Magazine, Allen and partner Frank Wright—hence the name A&W—began opening A&Ws throughout California and started franchising roadside restaurants in 1925. The chain is credited with creating the drive-in restaurant phenomenon of the 1950s and 60s. Today, there are about 1,000 restaurants around the world, with almost 600 in the U.S.

Average net sales of its reporting freestanding restaurants with drive-throughs are more than $950,777, according to its Financial Disclosure Document. Average comp sales are up 33% since 2011 and the company is focused on growing profitable same-store sales.

The total investment necessary to begin operation of an A&W franchise restaurant, not including rent or land, is between $269,000 and $1.2 million, depending on whether you choose to operate in a new, freestanding, inline or captive location, according to the FDD. Franchise fees range between $15,000 and $30,000.

Why this is a great opportunity:

  • Appeals to customer nostalgia
  • Low saturation compared to other brands
  • Reduced royalty fees for new owners (2% of net sales in year 1, 3% of net sales in year 2, and 4% of net sales in year 3; then 5% net sales for the remainder of the term.)

2. Checkers & Rally’s

Checkers and Rally’s is as all-American as the NASCAR races its iconic checkered flag design evokes, serving up hot dogs, hamburgers, and milkshakes since 1986. Come for the food, stay for the affordability: at $96k–$1.5M, the company’s initial franchise investment cost is on the lower end of the spectrum compared to competitors, yet offers a 62% return on investment, according to FDD report data.

Why this is a great opportunity:
•    Franchise incentives for military veterans
•    High return on investment
•    Included in Franchise Business Review’s Top 200 Franchises, Top Food Franchises

Learn more about owning a Checkers & Rally’s franchise. 

3. Chicken Salad Chick

While it’s not known for serving buckets of fried chicken, Chicken Salad Chick’s claim to fame is its chicken salad sandwiches. Stacy Brown, owner and ”original chick,” came up with the idea in her very own kitchen in 2008 and began franchising in 2012. The restaurant now has 140 locations in 16 states, most of them in the Southeast. Its footprint stretches from Texas to Missouri to Virginia. About 30% of the existing locations are company stores.

With a total initial investment of $483,000 – $648,000, this emerging brand might get you into the chicken coop for less cash. Franchisees pay a $50,000 franchise fee and a $10,000 grand opening fee.  You only need $150,000 liquid capital and $600,000 net worth per location to become your own Chicken Salad Chick.

Why this is a great opportunity:

  • Low initial investment cost
  • Franchisees voted it “excellent” in Core Values and General Satisfaction
  • Included in Franchise Business Review’s Top Food Franchises and Top Multi-Unit Franchises for 2019

Learn more about owning a Chicken Salad Chick franchise

4. East Coast Wings + Grill

If you are looking for a casual dining restaurant that gives guests a taste of everything – including chicken wings, sandwiches, burgers, ribs, and appetizers–East Coast Wings + Grill might be a sizzling option. The North-Carolina-based franchise is small – with only 36 units—but began franchising in 2003.

You get the choice of operating three different types of restaurants—Full Service, Fast Casual (an express-type restaurant) and University — each with a different initial investment.

•    Full-Service Restaurants range between $648,425 and $993,870
•    University Restaurants range between $439,943 and $921,712
•    Fast Casual Restaurants range between $308,500 and $607,487.

These numbers include franchise fee amounts between $45,000 and $59,000. Franchisees are required to have a net worth of $850,000 and $250,000 liquid cash.

Why this is a great opportunity:

  • Emerging brand, five new restaurants opened in 2018
  • Franchisees voted it “Very Good” in Financial Opportunity and General Satisfaction
  • Included in Franchise Business Review’s Top 200 Franchises, Top Food Franchises, and Top Innovative Franchises for 2019

Learn more about East Coast Wings + Grill

5. Firehouse Subs

Its tagline is “Enjoy More Subs. Save More Lives.” Founded in 1994 by Chris and Robin Sorenson — two brothers who come from a family of firefighters — the fast casual restaurant has doubled from 500 units to more than 1,100 in the past 8 years, according to QSR Magazine. Today, Firehouse Subs can be found across the country, between Maine and Alaska, with opportunities available in Canada, too.

With a total initial investment of $160,583 to $843,390, including an initial franchise fee of $20,000, the restaurant has a much lower entry fee than other sandwich giants. You do need $300,000 net worth and between $90,000 and $100,000 liquid cash on hand to invest.

Why this is a great opportunity:

  • Fun, firehouse theme
  • Incredible growth and plans for additional growth
  • Included in Franchise Business Review’s Top Food Franchises for 2019

Learn more about owning a Firehouse Subs franchise

6. Simple Simons Pizza

If you are looking for a place that serves tasty wings and good pizza, Simple Simon’s Pizza might be your slice of pie. The franchising company is based in Glenpool, OK, with a concept targeted toward small-town America. Simple Simons offers buffet style, eat in, and carry out options and a menu that includes sandwiches, breadsticks and desserts—in addition to chicken wings and pizza. Now operating in 200 locations in 10 states, Simple Simons has been franchising since 1985. It boasts a low start-up investment of $142,000 – $536,000, with a $20,000 franchise fee. Owners need $150,000 net worth and $25,000 liquid cash on hand to invest.

Why this is a great opportunity:

  • Very low initial investment
  • Franchisees voted it “Very Good” in Financial Opportunity and General Satisfaction

Learn more about owning a Simple Simons franchise

Ready to be the Colonel of Your Own KFC?

Owning a KFC franchise gives you the opportunity to be your own boss and earn an appetizing profit, but with so many franchise opportunities to choose from, you should carefully do your own research: look at different franchising options, weigh costs relative to profits, ask for feedback from current franchise owners, and be honest with yourself about how much time and money you can afford to invest.

 

Includes owner satisfaction report
out of 100

Wild Birds Unlimited

Industry: Pet Services, Retail

Wild Birds Unlimited provides a comprehensive array of bird feeding products, as well as local nature information.

Investment: $197,919 - $325,763 Cash Required: $40,000
FirstLight Home Care senior care franchise opportunity caregiver with elderly
Includes owner satisfaction report
out of 100

FirstLight Home Care

FirstLight Home Care provides home care services, helping seniors and people recovering from illness, injury or surgery, adults with disabilities, veterans and anyone 18 and older who need in-home sup…

Investment: $113,300 - $197,900 Cash Required: $100,000
Includes owner satisfaction report
out of 100

Any Lab Test Now

Any Lab Test Now provides direct access to clinical, DNA and drug and alcohol lab testing services, as well as phlebotomy and other specimen collection services, through a retail storefront business m…

Investment: $133,900 - $227,900 Cash Required: $90,000